On Tuesday, Obama announced that Chrysler had paid back all "outstanding loans to the U.S. Treasury and American taxpayers." This is highly misleading. American taxpayers still own a 6.6 percent stake in Chrysler, which cost them nearly $2 billion. Chrysler would have to be worth six times its current value ($5 billion) for the government to break even.
Obama's statement also conveniently forgets the $1.9 billion loan that was erased when Chrysler declared bankruptcy in 2009, and the additional $1.5 billion loaned to Chrysler's suppliers. And don't forget that the only way Chrysler could secure the money to pay off the Treasury loan was by getting Obama Energy Secretary Steven Chu to promise the company an additional $3.5 billion for energy-efficient vehicles. In reality, Chrysler is simply in the process of substituting one government loan for another.
The story is no better at General Motors, which supposedly just posted its biggest profit in a decade this quarter. But GM did not make that money selling cars -- rather, it came from the one-time sale of a subsidiary company. GM had bought Delphi, one of its troubled suppliers, for $2.5 billion in 2009. Then Delphi dumped $6.25 billion worth of its pension obligations onto the federal government's Pension Benefit Guaranty Corp. With those debts gone, GM sold Delphi for $3.8 billion this quarter. Voila -- huge profits for GM, all at the expense of the pensioners who fund and could someday depend on the PBGC (and possibly the taxpayers, too).
Despite these shady deals and accounting shell games, and despite the effective suspension of the rule of law that made the auto bailout possible, the Obama administration still hasn't made this deal worth the investment. According to the Government Accountability Office, U.S. taxpayers have spent $49.5 billion bailing out GM. They will likely never recoup the full $27 billion still tied up in the deal, especially considering that the entire company is only worth $46 billion. And the Chrysler situation is far worse: The government has spent $12.5 billion so far to bail out a $5 billion company. To whatever extent Americans understand the real story behind the auto bailouts, they will be an albatross around the neck of Obama's re-election prospects, not a political asset.